Mo Ibrahim, a telecoms billionaire and philanthropist, has blamed the high cost of capital in Africa on the grades rating agencies give countries on the continent.
The 77-year-old Sudanese founder of Mo Ibrahim Foundation delivered the criticism during a conversation with Ajay Banga, president of the World Bank, at the annual meeting of the lender in Marrakech, Morocco.
His strongly worded comments lend voice to similar complaints several African presidents and finance ministers have made of late.
In February 2023, Nigeria’s then finance minister, Zainab Ahmed, said she disagreed with what she called a “surprise” downgrade of the country’s credit rating by Moody’s.
Moody’s downgraded the country’s credit ratings early in the year to Caa1 from B3, saying the government’s fiscal and debt position was expected to keep deteriorating.
“The problem with cost of capital in Africa is rating agencies’ junk grade of African countries. They sit in South Africa pontificating,” Ibrahim said.
He asked why African countries are considered distressed when their debt-to-GDP ratio is 40 percent while the ratio for European countries is 137 percent.
In absolute terms, Africa’s public debt is lower than any other world region but Oceania, according to a report by Mo Ibrahim Foundation.
The report said the total debt stock owed by all African governments equates to over $1.8 trillion, while Germany alone has a greater debt stock of $2.9 trillion.
“Even adjusted for GDP, African debt does not stand out as being uniquely high with 49 African countries having lower public debt-to-GDP ratios than the US (122.2 percent) in 2023. Japan (258.2 percent) and Greece (166.0 percent) have higher public debt-to-GDP ratios than any African country. Yet eight of the nine countries listed by the IMF as being in ‘debt-distress’ in 2023 are African. This is because structural factors make debt uniquely burdensome for Africa,” it said.
Countries’ ability to raise revenue through taxes is the reason for the disparity in ratings between, according to Ibrahim.
He called out the practice of rating agencies to offer consulting services to countries they have condemned which raises questions of conflict of interests.
“We have 600 million people in Africa without power. Without power, there is no development. There is no health, education, industry, no investment and there is no life,” he said.
On what the World Bank could do about this, Banga said: “When I joined the bank, I was shocked and that tells you that before I joined, it was not the number that was in my consciousness; by the way, it is part of the problem. People need to know that 600 million people in a continent could be the future of the world.”
The World Bank boss noted the idea of the multilateral lender creating a five-year energy plan for Africa.
He said: “The second thing we are trying to do is for all investors to bring in money into energy. It does not all come from government bonds. It has to come from private money as well. There is a need for a clear regulatory and policy framework. If the foundation is not in place, the money will go down the pipe. We have to get the regulatory policies in place.
“From the bank side, we are putting money in renewable energy; last year, we put roughly $4-5 billion in the year. To tell you how that is growing, it is seven over the four-three years; four to five was in one year. My objective is to multiply. The real challenge is to get money from other sources. The money will not come without proper, clear regulatory policies.”